Chubb Subsidiary Fined $1.3M for Underwriting NRA-Branded Insurance

The New York Department of Financial Services (DFS) has fined Chubb Ltd. and its subsidiary, Illinois Union Insurance Company, $1.3 million for underwriting the National Rifle Association (NRA)-branded Carry Guard insurance program in violation of New York insurance law.

Through a consent order with DFS regarding the Carry Guard program, Chubb consents to certain violations of New York law governing the sale of policies in the state’s excess lines market, according to a Chubb statement obtained by Insurance Journal.

“Chubb recognizes its responsibility to ensure that its policies comply with New York law,” according to the statement.

Chubb/Illinois Union represented to DFS that between approximately April and November 2017, 681 Carry Guard insurance policies were issued to New York residents, and no claims have been submitted under the Carry Guard insurance policies to date by New York residents, according to the consent order.

The company provided notice in October 2017 that it was voluntarily terminating its participation nationally in the Carry Guard program following the initiation of a DFS investigation involving Chubb, Lockton and the NRA in the Carry Guard insurance program. Chubb and Illinois Union suspended participation in the program around November 2017 and ceased making Carry Guard policies available for New York residents to purchase.

“Chubb at all times intended and believed its coverage to be in full compliance with New York law,” the company’s statement continued. “Chubb believes that this settlement is the best way to resolve the coverage questions raised by the department and is fully committed to cooperating with the department to remediate any issues or concerns regarding the Carry Guard program.”

The Chubb settlement comes after Insurance Journal reported last week that insurance broker Lockton will pay a $7 million fine for administering the Carry Guard program through its Lockton Affinity subsidiary, which is a licensed excess line broker in New York. The settlement with Lockton was considered the first in New York regulators’ broader investigation of the matter.

In a related development, the NRA is also suing Lockton Cos., alleging the insurance broker breached its contract with the firearms lobbying group. The NRA suit, filed in the Eastern District of Virginia, alleges the New York investigation was “orchestrated” by the gun control organization Everytown for Gun Safety, Bloomberg reported.

During its investigation, DFS found the NRA Carry Guard program unlawfully provided liability insurance to gun owners for acts of intentional wrongdoing and improperly provided legal services insurance for costs and expenses, as well as for any act of self-defense covered under the policy for gun owners and their resident family members who may be charged with a crime involving a legally possessed firearm, according to a DFS press release.

The NRA, which does not have a license from DFS to conduct insurance business in New York, actively marketed and solicited for the Carry Guard program through a website, email and direct mail, among other channels, the release stated.

The Carry Guard program provided coverage in any criminal proceeding against the policyholder or the policyholder’s family members, including coverage for bail money, premiums on bonds, attorney consultation fees and retainer expenses, expenses incurred for the investigation or defense of criminal charges and costs taxed against the insured or the insured’s resident family member in a criminal proceeding arising out of a shooting, according to the DFS release. The policy further covered expenses for psychological counseling support for the insured or the policyholder’s resident family member.

“Today’s action is another step in addressing the unlicensed and improper activity connected with the NRA’s unlawful ‘Carry Guard’ program,” said New York DFS Superintendent Maria T. Vullo in the release. “DFS will continue its comprehensive investigation into this matter to ensure that New York Insurance Law is enforced and that consumers are no longer conned into buying so-called ‘self-defense’ insurance coverage.”

According to the DFS press release, Illinois Union has agreed, in addition to the fine, to refrain from:

Participating in the Carry Guard insurance program or any similar program in New York and from providing Carry Guard or similar insurance policies for New York residents regardless of where they are written.

Entering into any other agreement, including any affinity-type insurance program, involving any line of insurance involving a contract of insurance involving the NRA, directly or indirectly.

Issuing or delivering insurance policies covering a New York resident that provides liability insurance for any act of intentional wrong doing or provides legal services insurance in a civil or criminal proceeding, including but not limited to: insurance for bail money, premiums on bonds, attorney consultation fee and retainer expenses, expenses incurred for the investigation or defense of criminal charges and costs taxed against the insured or the insured’s resident family member in a criminal proceeding.

Issuing or delivering insurance policies covering New York residents that provides insurance for expenses incurred for psychological counseling support, because Illinois Union is not authorized to provide such insurance.

“As the NRA has previously stated, it acted appropriately at all times,” said William A. Brewer III, partner at Brewer, Attorneys & Counselors and counsel for the NRA, in a statement regarding the consent order. “The NRA relied upon Lockton and its assurances that the Carry Guard program complied with all applicable state regulations.”

Brewer continued, “We are disappointed, but unfortunately not surprised, to see that today’s consent order prevents Chubb from entering into any affinity-type insurance programs with the NRA. We believe such limitations are unjustified – explained only as being part of the Department of Financial Services’ politically-motivated attack on the NRA and its law-abiding members.”

Illinois Union must also provide notice to New York policyholders within 10 business days of execution of the consent order that it is canceling all Carry Guard insurance policies 90 days from the date of notice and must return the policyholders’ premiums, the release stated.

No other state insurance regulators have indicated they are probing the NRA programs. A DFS spokesperson referred to the DFS press release when reached for comment.

Featured Comment

May 8, 2018 at 10:41 am

mr opinionsays:

Well-loved. Like or Dislike:

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Ok, ignore the gun control debate for a moment…
This is an insurance forum. Read carefully the portions of the policy the DFS took issue with, not the rebating or unlawful commissions, but the coverage they say was unlawful. Then read the Supplementary Payments section of the standard ISO CGL CG0001. Am I nuts or are half of those “illegal provisions” in every single policy written in NY on forms approved by the Superintendent? I’m not sure about the legality of all of the provisions, but there are definitely a few that DFS said were illegal that are in the standard ISO form. Take a look at the ISO CGL “Expected or Intended Injury” Exclusion: “This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.” Isn’t that exception to the exclusion providing the same coverage that was intended in CarryGuard? Please don’t respond with “yea but guns are bad” or the “NRA are criminals.” Read the article, read the form and let me know why these provisions are illegal. Thanks.

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January 4, 2019 at 2:48 pm

Stewart Taggartsays:

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